Best Buy 2008 Annual Report Download - page 23

General economic conditions, a decline in existing stores and may cause customer traffic and
consumer discretionary spending or other comparable store sales performance to decline at those
conditions may materially adversely impact our existing stores.
sales in a disproportionate fashion. We also intend to open stores in new markets. The risks
We sell products and services that consumers tend to view associated with entering a new market include difficulties
as conveniences rather than necessities. As a result, our in attracting customers due to a lack of customer
results of operations are more sensitive to changes in familiarity with our brand, our lack of familiarity with local
general economic conditions that impact consumer customer preferences, seasonal differences in the market
spending, including discretionary spending. Future and our ability to obtain the necessary governmental
economic conditions and other factors including consumer approvals. In addition, entry into new markets may bring
confidence, employment levels, interest rates, tax rates, us into competition with new competitors or with existing
consumer debt levels, fuel and energy costs and the competitors with a large, established market presence. We
availability of consumer credit could reduce consumer cannot ensure that our new stores will be profitably
spending or change consumer purchasing habits. A deployed; as a result, our future profitability may be
general slowdown in the U.S. economy or in the global materially adversely affected.
economy, or an uncertain economic outlook, could
materially adversely affect consumer spending habits and Risks associated with the vendors from whom our
our operating results. products are sourced could materially adversely
affect our revenue and gross profit.
The domestic and international political situation also
affects consumer confidence. The outcomes of political The products we sell are sourced from a wide variety of
races and the threat or outbreak of terrorism or other domestic and international vendors. Global sourcing has
hostilities could lead to a decrease in consumer spending. become an increasingly important part of our business and
Any of these events and factors could cause a decrease in positively affects our financial performance. Our 20 largest
revenue or an increase in inventory markdowns or certain suppliers account for just over 60% of the merchandise we
operating expenses, which could materially adversely affect purchase. If any of our key vendors fails to supply us with
our results of operations. products, we may not be able to meet the demands of our
customers and our revenue could materially decline. We
Our growth strategy includes expanding our require all of our vendors to comply with applicable laws,
business, both in existing markets and by opening including labor and environmental laws, and otherwise be
stores in new markets. certified as meeting our required vendor standards of
conduct. Our ability to find qualified vendors who meet
Our future growth is dependent, in part, on our ability to our standards and supply products in a timely and efficient
build, buy or lease new stores. We compete with other manner is a significant challenge, especially with respect
retailers and businesses for suitable locations for our to goods sourced from outside the U.S. Political or
stores. Local land use, local zoning issues, environmental financial instability, merchandise quality issues, product
regulations and other regulations applicable to the types safety concerns, trade restrictions, work stoppages, tariffs,
of stores we desire to construct may impact our ability to foreign currency exchange rates, transportation capacity
find suitable locations, and also influence the cost of and costs, inflation, outbreak of pandemics and other
building, buying and leasing our stores. We also may have factors relating to foreign trade are beyond our control.
difficulty negotiating real estate purchase agreements and These and other issues affecting our vendors could
leases on acceptable terms. Failure to manage effectively materially adversely affect our revenue and gross profit.
these and other similar factors will affect our ability to
build, buy and lease new stores, which may have a We are subject to certain regulatory and legal
material adverse effect on our future profitability. developments which could have a material adverse
We seek to expand our business in existing markets in impact on our business.
order to attain a greater overall market share. Because Our regulatory and legal environment exposes us to
our stores typically draw customers from their local areas, complex compliance and litigation risks that could
a new store may draw customers away from our nearby
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